Two years after the entry into force of the law on the registration of the final beneficial owners of businesses in Albania, the deadlines for the registration of the latter have been postponed from time to time, while the CKB has not imposed any penal measures for law breakers, and has not a statistic on cases that refuse or carry out fictitious registration.
Authors: Dallandyshe Xhaferri and Fjori Sinoruka
In 2020, the Albanian Parliament passed the law "On the Register of Beneficial Owners", which obliged every business in the Republic of Albania to register in the Register of Beneficial Owners, by June 2020, the beneficial owners of their income. But, this initiative began to fail without yet taking a final form.
According to the report published by the Albanian government one year after the passage of the law, and efforts to amend it, it results that “out of 59,165 existing reporting entities registered in the Commercial Registry before the date of creation of the Beneficial Owners Registry, of which 8,689 entities with suspended status, based on VKM no. 273/2021, have the obligation to register the beneficial owner in the beneficial owner registry, prior to the request to change their status in the commercial registry, only 21,460 existing reporting entities have registered the data of their beneficial owners in the registry by 10.11.2021”. In other words, approximately only 36,3% of existing reporting entities registered in the Commercial Registry have registered the data of their beneficial owners.
Also, initially, problems were encountered in the registration of beneficial owners of Non-Profit Organizations. According to the government report , out of 4,861 existing Non-Profit Organizations registered in the Registry of Non-Profit Organizations, only 1,961 Non-Profit Organizations had registered the data of their beneficial owners in the registry by November 2021. In other words, only 40,3% of NPOs had registered the data of their beneficial owners.
The lack of registrations on the part of businesses influenced the decision to postpone the deadline for the registration of beneficial owner data until April of this year.
"Through this draft law, several legal changes have been undertaken that enable: Postponement of the deadline for the initial reporting of beneficial owners by existing reporting entities with indirect ownership registered in the commercial register and by Non-Profit Organizations, until 01.04.2022 ", - it is stated in the government statement published in December last year, but the National Business Center has announced to ACQJ that the deadline for fulfilling the legal obligation for the initial registration of data for entities with indirect ownership and NGOs was postponed until June 30, 2022.
On November 2 of this year, this institution announced that, as far as companies are concerned, 828 entities had not fulfilled this legal obligation, while according to the data forwarded by AKSHI, until September of this year, the data of beneficial owners of about 42 commercial entities.
The Central Bank of Kosovo informs the ACQJ that "entities that have not completed the initial registration of the beneficial owner's data and updated them according to the legal deadlines based on legal provisions are punished with a fine", adding that until the fine is paid, these entities will not offer their Services, except for registering changes to the legal representative's data, and will change the status of reporting entities from "active" to "suspended" in the Commercial Register and the Register of Non-Profit Organizations.
But, despite the request from ACQJ, this institution has not announced how many companies this measure was taken against and what was the monetary amount paid by them.
The government's initiative for the beneficial owner registration law started with problems
Aranita Brahaj, Executive Director of the Albanian Institute of Science, at the same time director of "Open Data", tells ACQJ that the initiative of the Albanian government started with problems, as the law did not provide any guarantees.
"By adopting a law that forces everyone to make a declaration, the Government and the Legislator damaged the purpose of the process ," she says, describing this fact as the main reason why the law began to be implemented much later. " There was no focus on those who really need to be checked, verified and publicly recognized ," she continues, adding that "with self-declaration, the Legislator does not guarantee in any case that the information comes with truth. The verification process is not even done for businesses that are financed by public money or licensed for very important Services of a public nature."
For the economy expert, Zef Preçi, our country is still far from respecting transparency in economic activities.
"By comparing the current state of public companies in our country, especially with regard to transparency and competition, it can be concluded that our country is far from recognizing and even further from implementing these principles and models known and universally accepted in today's world," says Preçi.
Meanwhile, Brahaj admits that the way of drafting the law on registration for beneficiaries has no efficiency in implementation.
"In my opinion, the way it was drafted, without an exhaustive declaration, with self-declaration without control and verification, with spaces for unclear declarations, the Law has only stressed businesses with the declaration bureaucracy and the pressure for fines if the declaration is not made on time." - she notes.
She further asserts that in all this strange format with self-declaration, without verification, with a declaration just like businesses with commitment and public financing like others, the law does not have any efficiency in implementation.
"Enough has been done to fulfill a formal condition", she concludes, emphasizing that only the owners of 25% of the shares and capital have the obligation to declare.
What does this mean? If an individual with a precedent, a person with influence in politics and government is somewhere a shareholder in a company that has won public contracts, he is protected. That is, he is not identified if he has less than 25% control over the ownership of the business.
Malfunction of the law on the declaration of beneficial owners, the consequences in the economy
Zef Preçi, the economy expert, emphasizes for ACQJ that anonymity enables the development of illegal activities such as fiscal evasion, money laundering and corruption to develop outside the control of law enforcement authorities.
"Offshore companies have been used in most corruption cases, including in Albania, to transfer hundreds of millions of dollars to companies without staff in countries known as 'tax havens', using complex money transfers, shell companies and other legal structures behind which the so-called 'beneficial owners' can hide," says Preçi, taking as an example the companies created for incinerators, according to which there are well-founded suspicions that important politicians in the country are behind them.
“Transparency around beneficial ownership aims to prevent company owners from acting in secret. Defining in law as beneficial owners individuals who ultimately own or control a legal entity, through direct or indirect ownership of 25% of the shares or voting rights or property interests in that entity, or through control through other means, or who benefits from a transaction carried out by the legal entity in its account helps to take a step forward in increasing transparency, but it is not sufficient,” says Preçi.
"The 25% level of shares set in the law leaves room for concealment," he concludes.
Meanwhile, the CKB responds to the ACQJ's question about how they identify whether business contracts are genuine or not, that "based on the VKM No. 1088, dated 24.12.2020, "On determining the manner and procedures for registering and publishing data on beneficial owners, as well as notification by competent state authorities and obligated entities", among other things, the CKB registration officer identifies whether or not the signatory is to carry out the registration and whether the submitted documentation does not contain unverified corrections or deletions."
Despite the occasional postponement of the deadlines for the registration of beneficial owners, this law has not yet found general application, while the forced declaration of owners who own more than 25% of the shares leaves a path for hiding the real owners behind various businesses. both those that benefit from state contracts and those that operate in areas of high social risk, such as casinos or gambling.
